Diaz-Morales v. Rubio-Paredes

997 F.3d 75

• Court: Court of Appeals for the First Circuit
• Decided: May 10, 2021
• Docket: 18-1074P
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 18-1074 ROBERT ANEL DÍAZ-MORALES,

Plaintiff, Appellee,

v.

SERGIO RUBIO-PAREDES, Puerto Rico District Attorney; EMILIO ARILL-GARCIA; LIMARIS CRUZ-VÉLEZ,

Defendants, Appellants,

JOHN DOE; CONJUGAL PARTNERSHIP DOE-CRUZ; UNKNOWN PUERTO RICO POLICE RANKED SUPERVISORS AND OFFICERS A., B., AND C.; JANE DOE; CONJUGAL PARTNERSHIP RUBIO-DOE; MARY DOE; CONJUGAL PARTNERSHIP ARILL-DOE; UNKNOWN ASSISTANT DISTRICT ATTORNEYS D., E., AND F.,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

[Hon. Juan M. Pérez-Giménez, U.S. District Judge]

Before

Howard, Chief Judge, and Barron, Circuit Judge.*

* Judge Torruella heard oral argument in this matter and participated in the semble, but he did not participate in the issuance of the panel's opinion in this case. The remaining two panelists therefore issued the opinion pursuant to 28 U.S.C. § 46(d). Ángel E. Rotger-Sabat, with whom Ramón Coto-Ojeda and Coto & Associates were on brief, for the Appellee. Carlos Lugo-Fiol, with whom Isaías Sánchez-Báez, Solicitor General of Puerto Rico, was on brief, for the Appellants.

May 10, 2021 HOWARD, Chief Judge. Like Colón-Torres v. Negrón-

Fernández, No. 18-1579 (1st. Cir May 10, 2021), which was also

decided today, this case implicates a question about the scope of

the automatic stay provision of the Puerto Rico Oversight,

Management, and Economic Stability Act ("PROMESA"). And, like

Colón-Torres, this dispute arises from a settlement following a

suit under 42 U.S.C. § 1983 against an officer of the Commonwealth

of Puerto Rico sued in the officer's individual capacity.

In Colón-Torres, we confronted a plaintiff's effort to

recover under the settlement, and we concluded that the enforcement

action at issue must be stayed under PROMESA, even though the

original suit was against the officer individually, because the

plaintiff's motion to enforce the settlement was against the

Commonwealth and sought payment directly from it pursuant to the

settlement. See Colón-Torres, slip op. at 17–21. Here, however,

the § 1983 claim itself has been dismissed with prejudice, and

there is no pending action to enforce the settlement through an

action against the Commonwealth or anyone else. We thus conclude

that the District Court was right to deny the Commonwealth's

motions for reconsideration that are at issue, insofar as they may

be construed as motions to apply PROMESA's automatic stay to either

the now-dismissed § 1983 action or the as-yet-unenforced

settlement agreement.

- 3 - I. BACKGROUND

Because the parties reached a settlement, we recite the

facts underlying this case only briefly and draw them from the

district court's opinions at the motion to dismiss and summary

judgment stages.

A. Factual Background

In November 2003, the plaintiff, Robert Anel Díaz-

Morales, was convicted of murder and assault in connection with

the October 2001 death of Kenia Rosario Viera. In May 2012, the

Supreme Court of Puerto Rico vacated Díaz's conviction and

sentence. Shortly thereafter, Díaz filed suit in the Federal

District Court for the District of Puerto Rico for violations of

his civil rights under 42 U.S.C. § 1983 against the Defendants:

the law enforcement officer in charge of investigating the murder

and the two district attorneys who prosecuted his case.

In particular, Díaz alleged that, during the course of

the investigation, law enforcement officers, including Defendant

Limaris Cruz-Vélez, were told by several witnesses that four other

individuals, including the victim's former romantic partner, were

responsible for the assault and murder. But Cruz and other

officers were led to Díaz after tracking the victim's phone. Díaz

was interviewed and eventually arrested and charged with murder.

Díaz later alleged that he was only charged because Cruz conducted

the investigation recklessly and with gross disregard for his

- 4 - rights and protections under the Fourth and Fifth Amendments. Díaz

also alleged that Defendant Sergio Rubio-Paredes, the lead

district attorney in his case, not only charged and prosecuted him

despite knowing that other suspects had been identified but also

coerced witnesses to implicate Díaz. Díaz raised the same

allegations, along with a claim for supervisory liability, against

Defendant Emilio Arill-Garcia, Rubio's direct supervisor.

B. Procedural History

In March 2016, the district court granted in part and

denied in part the Defendants' motion for summary judgment. Though

the district court concluded that Díaz had failed to provide any

proof of a conspiracy between the Defendants, it allowed Díaz's

claims for malicious prosecution to proceed against each defendant

individually. The parties then began preparing for trial, which

was scheduled to begin on January 23, 2017. On the eve of trial,

the parties began settlement negotiations and, on February 3, 2017,

Díaz notified the court that they had reached a settlement and

that the case would be voluntarily dismissed.

The settlement agreement was filed under seal, and the

district court dismissed the case with prejudice on February 6,

2017. In the judgment, the district court expressly stated that

"[i]n accordance with the stipulation, the court will retain

jurisdiction until the terms and conditions of [the settlement]

are implemented and fully complied with." As relevant here, the

- 5 - agreement specifically stated that the settlement amount would "be

paid to . . . Robert Díaz-Morales by the Commonwealth of Puerto

Rico" because "Defendants are beneficiaries of [Puerto Rico Law

9]." (emphasis added). The settlement ordered the payment to be

made in installments, with the first installment due by December

31, 2017.

On May 3, 2017, before the first installment of the

agreed settlement payments was due, the Financial Oversight and

Management Board ("FOMB") filed a petition for bankruptcy relief

on behalf of the Commonwealth under Title III of PROMESA. On

September 4, 2017, the Puerto Rico Department of Justice, on behalf

of the Defendants, filed an "informative motion" with the district

court notifying it of the Title III petition; the motion did not

ask the district court to take any action.

Nevertheless, Díaz filed a motion in opposition. He

argued that the "automatic stay is not applicable to this case"

and that "the judgment against the Defendants is enforceable."

Specifically, he first contended that the complaint "was NOT

against the Commonwealth nor was it on account of a debt of the

Commonwealth" but instead "sought damages against the Defendants[]

exclusively in their personal and individual capacity." He went

on to assert that if the settlement were breached, the district

court would retain jurisdiction to determine the proper course but

that such a possibility remained "premature and speculative."

- 6 - The district court granted Díaz's opposition without

elaboration, and the Defendants sought reconsideration. They

argued that "the stay bars [Díaz] from continuing his collection

efforts against the Government through the instant Complaint,"

since the Commonwealth was the party "responsible for paying the

amount agreed upon in the covenant." They devoted the bulk of

their motion to the assertion that a claim against an officer of

Puerto Rico in his individual capacity seeks to enforce a claim

against the Commonwealth, then closed by arguing that "in all

earnest, this discussion is moot given that there is a settlement

agreement that disposed of the case at bar -- and that settlement

unequivocally states that the Commonwealth will pay." Thus, the

Defendants requested that the District Court "respect the

automatic stay that is in effect."

The district court denied the motion for

reconsideration, this time issuing an opinion. The district court

reasoned that the Commonwealth was not a party to the suit or the

judgment because the plaintiff had sought damages from the

Defendants solely in their individual capacities. The district

court also noted that at no point in the litigation was there a

"cause of action alleged against the Commonwealth[] seeking

payment or compensation of any kind" and that, because the

Commonwealth had "consistently averred that in no way ha[d] it

submitted to the [court's] jurisdiction," there was "nothing to be

- 7 - stayed here." The Defendants filed a second motion for

reconsideration, primarily to highlight additional case law, but

the district court denied that motion as well.

The Defendants timely appealed both the initial denial

of the motion and the denial of both motions for reconsideration.

II. DISCUSSION

We typically review a district court's denial of

reconsideration for abuse of discretion, but we will evaluate the

denial of these motions de novo because they "cover[ ] . . . more

or less the same points . . . earlier made to the district court."

Town of Norwood v. New Eng. Power Co., 202 F.3d 408, 415 (1st Cir.

2000) (emphasis omitted). In undertaking that review, we treat

the denials of these motions, as the parties do, as rulings that

the PROMESA automatic stay does not apply in the face of a request

to apply it to either the § 1983 suit itself or an action to

enforce the settlement agreement. We thus consider the

Commonwealth's appeal to be a challenge to the conclusion that the

stay does not apply here because the § 1983 suit has been dismissed

with prejudice and no action to enforce the settlement has yet

been brought, such that, as the district court articulated, "there

is nothing to be stayed." For the reasons that we will explain,

we conclude that the district court was right.

In Colón-Torres, we concluded that the PROMESA stay

applied to a motion the plaintiff had filed seeking payment from

- 8 - the Commonwealth directly under a settlement agreement because we

held that motion was an effort "to recover a claim against" the

Commonwealth. Colón-Torres, slip op. at 20 (quoting 11 U.S.C.

§ 362(a)(1)). PROMESA, we explained, directly incorporates the

automatic stay provisions of the Bankruptcy Code, 11 U.S.C. §§ 362,

922, which, among other things, stay "the commencement or

continuation . . . of a judicial . . . action or proceeding

against the debtor . . . to recover a claim against the debtor."

Id. § 362(a)(1).

In Colón-Torres, the parties disputed whether the

Commonwealth was a party to the settlement, but the plaintiff-

appellee had styled his motion to recoup the settlement monies as

one against the Commonwealth rather than one against the individual

defendant. For that reason, we held that his enforcement action

must be stayed as it was an action "against the debtor." Colón-

Torres, slip op. at 17-21.

Here, by contrast, even accepting that the text of the

settlement agreement indicates that the Commonwealth is the liable

party under it, there is no "action" or "proceeding" demanding

that the Commonwealth make the payment to the plaintiff, and there

has been no effort to "commence[]" or "continu[e]" one. 11 U.S.C.

§ 362(a)(1). Of course, at the time the motion for reconsideration

was filed, there was some chance that the Commonwealth might refuse

to comply with the terms of the agreement when the deadline for

- 9 - payment arrived, and that the plaintiff might then ask the district

court to enforce the obligation.1 Even so, Díaz was right to argue

that possibility remained "premature and speculative" at the times

relevant to this appeal. Thus, we agree with the district court

that "there is nothing to be stayed here" with respect to the

enforcement of the settlement itself.

The appellant-Defendants do renew their contention that

the complaint in the original § 1983 action "is functionally an

action against the Commonwealth." Regardless of whether they are

right to so argue, cf. Colón-Torres, slip op. at 22-24, however,

that action was not before the district court at the time they

sought application of the stay. Though this dispute has its

genesis in that § 1983 suit, the complaint was dismissed with

prejudice pursuant to the terms of the settlement agreement before

the Commonwealth filed for bankruptcy. Whether the "commencement"

or "continuation" of that action should have been stayed pursuant

to § 922 -- if it had still been live at the time of filing -- is

not before us.

Of course, if Díaz does make any attempt to enforce the

settlement here, Colón-Torres would likely bear on the question of

1 The district court expressly retained jurisdiction to enforce the settlement agreement in its judgment dismissing the case. Cf. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 378, 381 (1994); Colón-Torres, slip op. at 15–16 (discussing the Commonwealth's challenge to the district court's jurisdiction to enforce the terms of the settlement agreement).

- 10 - whether his claim could proceed. Because the Commonwealth is the

only party that has expressly committed in the settlement to pay

the agreed-upon amount, it may be that any future collection effort

under the terms of that agreement would be against the

Commonwealth. See Colón-Torres, slip op. at 22-24. And, any

action to enforce the settlement in this case that "seeks to

recover a claim against the debtor" must be stayed if it is

brought. See 11 U.S.C. § 362. But, no such action is now pending,

and the settlement agreement itself does not trigger the automatic

stay. See Smith v. Capital One Bank (USA), N.A., 845 F.3d 256,

258-59, 261 n.4 (7th Cir. 2016) (holding automatic stay was not

violated where credit card company received a judgment it may have

been able to enforce against a debtor but had not tried to do so).

III. CONCLUSION

For the foregoing reasons, we affirm the district

court's order denying the application of the PROMESA stay.

- 11 -